PM raise and Board Numbers

Started by JoeD5 • 5 replies • 1263 views

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JoeD5 (California)
Posts: 4

Posted:

Have two questions in one....

First, our PM company has allowed itself to request 2 raises in one year. The second raise doubled their fee to us. Now as a board member I never approved this. Is this a legal and ethical move on their part or just stupidity on ours.

Second, WE currently have 5 board members and we want to switch to 7. Is there any legal way to do this....????

Thanks

JudithC (Virginia)
Posts: 253

Posted:

On the first question, don't you have a contract with the PM that would restrict his being able to give himself more money? It clearly seems like a board decision to me.

On the number of members of the board -- it is probably defined somewhere in your documents. In ours it is in the Bylaws so the number can be changed by an amendment to the bylaws. Usually you wouldn't be able to change it just willy nilly.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

JoeD5: You need to review the PM contract carefully. Also, request the reason/s for 2 raises--additional duties not included in the present contract? does the contract really allow the PM to decide for a raise on his own?

The contract is normally drawn up between the Board and the PM with the PM's signature and Board member (Pres.)signature. Unless the contract specifically addresses raises without Board approval and whether this can be done during the interim period between contract renewal, you might want to question their ability as your community's agent.

Your Bylaws will dictate the percentage of unit owners necessary to pass a vote to amend them, and then whether the amendment needs to be officially filed.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Judith,
That is excellent advise about changing the documents. I also believe it would be proper to amend any of our documents except State Statutes, by vote at a special meeting called to do this. If it is there we can certainly amend it nearly all the time. To add or dele sections is also possible, by this manner. It is prudent to try and amend all those changes at the same time. A lawyer probably is not necessary, make the changes and register them at court house. Any rules etc., the board was responsible for can be changed by vote of the board, and need not be registered.

To me, as far as any conflicts with Managers or PM, the Board created this problem, the board will have to solve it. I would suggest when that is being done they closely read any contracts and insure the Board has clear authority to terminate contract and don't sign anything that is going to comit your association long term.....never. If this is a case of the board having majority vote to approve expeditures of this sort, it may be helpful to consider something other than majority rules in this case, especially on a small board.

NancyD1 (Florida)
Posts: 447

Posted:

Quote:

Posted By JoeD5 on 09/25/2007 11:24 PM
Have two questions in one....

First, our PM company has allowed itself to request 2 raises in one year. The second raise doubled their fee to us. Now as a board member I never approved this. Is this a legal and ethical move on their part or just stupidity on ours.

Second, WE currently have 5 board members and we want to switch to 7. Is there any legal way to do this....????

Thanks

The contract you have with the PM company should spell out why there should be increases or if they are even allowed; and the procedures for acceptance or rejection. You do have a copy of the contract?

If they "requested" you do not have to accept, and it should be a BOD decision, not the PM company's. If they have control of your finances and they did give themselves this raise, it is unjust enrichment. If they have increased their fee without approval, and the contract states they need approval, they have voided the contract.

The BOD has to make the PM accountable for the raises. What are they for? If the BOD sanctions the increase, it should be added as an addendum to the contract for future reference.

There should be a statute in your By-Laws for the increase or decrease of BOD members and a procedure method that you will have to follow to accomplish this.

DonnaS (Tennessee)
Posts: 5,671

Posted:

You should have a contract with the M.C. If you do not then you either have to fire them or try to negotiate a lower fee. Good luck on that one but I highly reccomend to have a solid contract. Spell out their duties and fees to save yourselves this happening again.

Now for the Board member increase. If you are incorporated, in your Articles, it should have Board member numbers. ByLaws are 3rd in command as for your Documents. Protective Covenants being number 1 (cc&rs), Articles of incorporation is #2 and ByLaws is 3rd so you need to see where your Board member number is stated. If you wish to increase to 7, then that must be done thru an amendment to your 1, 2 or 3 statement. This amendment is in a vote form sent to all owners of properties in your association. It will pass by whatever percent your documents require or fail. If it passes, it must be then filed with your existing documents, within your County of residence.
When you get an increase, you will need another election or you can wait until your annual to elect the 7, which is easier to do. This all will take some time if you do it according to statute procedure.

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